Retail fund managers are earning tens of millions of pounds by loaning their clients' investments to financial speculators, new research reveals.

Some of the UK's best-known retail money managers and their agents are generating the windfalls from the opaque practice of stock lending, analysis by investment management company SCM Private warns. Critics say the cash is being earned for little work and risk.

Stock lending is the practice of loaning shares to a third party in exchange for a fee and collateral, and it can generate significant extra revenues for client funds. The borrower can then use the shares to make a bet that the price of those shares will fall – also known as short-selling – but if the borrower goes bankrupt the owner can potentially lose out. Stock lending is legal and widespread, but several European countries moved last month to limit short-selling, blaming the practice for driving down the price of bank shares and unnerving markets.

Gina Miller, co-founder of SCM said: "Many investors will not be aware that certain retail funds are legally permitted to potentially risk 100% of their savings through stock lending. Clear and full disclosure regarding stock lending should be mandatory to protect investors. In our opinion, the minimum levels of disclosure and protection for retail investors contained within UK legislation are totally inadequate. The Financial Services Authority needs to address the key issues of risk and transparency across the whole retail investment industry so retail investors can make fully informed educated decisions."

In total, 19 of the 20 funds examined by SCM have made provisions to lend up to 100% of their clients' shares, with half found to have participated in stock lending. SCM said that just 66% of the gross income from stock lending is returned to clients' funds on average – but that figure could be far lower, in reality as the number is derived from just seven of the 20 funds which actually disclose their charges. The rest of the money generated goes to the fund managers.

Research company Data Explorers estimates that global revenues from stock lending totalled about £4.5bn in 2010 – of which £850m is thought to apply to the UK. Of that, a significant but unknown proportion is attributable to retail funds.

The SCM research does not name the specific funds making money from stock lending. However, analysis by the Guardian has identified several top retail fund managers that provide details of how they charge for lending out their clients' investments, albeit via disclosures often buried in lengthy documents.

BlackRock takes 40% of revenues made from lending shares held in its funds, as it also acts as the agent lending the stock; Schroders charges 20% with its agent earning 17.5%; Henderson 18% and the agent 22%; and Threadneedle 14% and 15%.

None of the funds listed above comment on the charges or stock lending. The Schroders unit trust prospectus states it receives its fees to "cover administration services which are carried out and expenses properly incurred in supporting any stock lending activities".

Meanwhile, a BlackRock notice to clients justifies how it has just increased charges by 10 percentage points: "The manager is of the view that the revised fee arrangement is appropriate in consideration of the potential to generate greater income for the funds than their existing programme," it says.

While the practice of charging millions in stock lending fees is widespread within the fund management industry, it is not universal. Legal & General is thought to be the one company out of the 20 examined in the research which does not lend stock from its retail funds. Meanwhile, in the US, Vanguard states that: "Unlike other firms that allocate a significant portion of lending revenues to their management companies, Vanguard returns all lending revenues, net of broker rebates, programme costs, and agent fees, to the funds."

The issue of stock lending is beginning to attract the attentions of regulators globally. In a speech given to the British Bankers' Association in June of this year, Paul Tucker, deputy governor of the Bank of England, said: "The authorities have not done enough, in my personal view, to encourage robust practices in repo and securities lending markets. That is likely to form part of the Financial Stability Board's work on shadow banking".

Last year the US senate launched an investigation into stock lending. The FSA did not comment on stock lending.